Measuring Prices and Price Competition Online: Amazon.com and BarnesandNoble.com |
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| Authors: | Chevalier Judith Goolsbee Austan |
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| Institution: | (1) Yale School of Management, 135 Prospect Street, New Haven, CT, 06520 and;(2) National Bureau of Economic Research, USA;(3) University of Chicago Graduate School of Business, 1101 E. 58th Street, Chicago, IL, 60637;(4) National Bureau of Economic Research and American Bar Foundation, USA |
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| Abstract: | Despite the interest in measuring price sensitivity of online consumers, most academic work on Internet commerce is hindered by a lack of data on quantity. In this paper we use publicly available data on the sales ranks of about 20,000 books to derive quantity proxies at the two leading online booksellers. Matching this information to prices, we can directly estimate the elasticities of demand facing both merchants as well as create a price index for online books. The results show significant price sensitivity at both merchants but demand at BarnesandNoble.com is much more price-elastic than is demand at Amazon.com. The data also allow us to estimate the magnitude of bias in the CPI due to the rise of Internet sales. |
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| Keywords: | internet retail perfect competition price indices elasticity |
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